The Independent Consultantís Newsletter

7 Secrets of the WEALTHY Investor   

Seven Proven Ways To Maximize Your
RRSP Wealth

Nine out of ten Canadian Taxpayers agree that saving for retirement is important. They no longer falsely depend on the elusive government pension cheque.  Aware that the Canada Pension Plan is facing a crisis by the year 2015, one out of four contributes to a Registered Retirement Savings Plan (RRSP). Many flock to retirement seminars, read books on personal finance, and use personal financial software on their computer. Here are seven secret directives of those who eventually create wealth investing in RRSPs.


1.  Assess Your Rate of Return.


Canadians are conservative by nature. You may feel an overpowering urge to invest with only safety as your goal. It seems normal to focus on GICs or Money Market Funds and accept the low interest as a payoff for security. The danger is, you risk running out of money before you run out of time. Donít underestimate the effect of the higher returns achieved by also investing in Mutual Funds or Segregated Funds with a mandate for more aggressive growth. The

Baby Boom generation,  approaching middle age, should definitely take advantage of these funds. For example: $4,800 invested in an RRSP for 20 years at 6%, would amount to $187,165. Invested at 9% per annum, it would yield $267,670. At 12% the same investment reaches $387,345. Greater wealth is achieved by investing in mutual funds which own shares in profitable companies. They provide the greatest capital gains, and lessen the effect inflation has on future buying power.


2.  Develop a Custom Portfolio.


Determine a strategy to diversify your RRSP holdings in growth investments (Equity Funds, Common Stocks), income investments (Income Funds, Preferred Shares, Bonds, GICs) and cash equivalents (Money Market Funds, Treasury Bills). Goals and investment needs change over time. Dependent on age, and the timing of your goals, not everyone is advised to hold all their RRSPs entirely in growth oriented investments. Nearer to retirement, a balanced portfolio becomes a serious




Custom fit investments to your age and retirement goals.

3.  Maximize Your Contribution &          Revenue Canadaís Tax Savings.


RRSP investing can give you a little tax break, or a very large tax break depending on how much you invest. Taxed at 45%, investing $4,000 in your RRSP would save $1,800 in taxes.  Investing $12,500 would save a whopping $5,625. On an annual basis, invested over 30 years at 10%, the higher contribution will yield $1,538,019 more. The tax savings is an added benefit annually.  Get Revenue Canada to help you contribute a larger portion to your RRSP investment via tax savings.


4.  Understand the Value Time Adds to Money


Get into the habit of paying yourself before you pay the bills. Your spending and lifestyle will then be based on the money





Seven Proven Ways to Maximize Your RRSP Wealth

left after youíve taken care of your retirement planning. Based on a current income of $45,000, it is predicted you will

At 10.5%, $10,000 invested over 10 years will amount to $27,140, while in 30 years it will total $199,925. By investing 20 years earlier, the capital will increase to more than seven times as much!

To get time on your side, invest in advance of the RRSP deadline, and begin investing in RRSPís early in life.




The Rule of 72 is an easy method to determine how long it will take to double your invested money.  Itís simple: Divide your annual percentage rate of return (yield) into 72. The answer will tell you how many years are necessary to double your money.


72 / Yield = Years to Double Money


24%      3.0 Years

18%      4.0 Years

12%      6.0 Years

 10%      7.2 Years

   6%    12.0 Years


5. Invest With a Global Perspective


Canada was among the worldís top five performing markets only once in the last 10 years. Different economies experience higher stock market performance at differing times. In cyclic fashion, markets rise, plateau, peak, and decline.  Opportunity  may  be in Germany one year, Japan the next.  Up to 20% of your RRSP may be positioned in foreign investments. Canada represents only 3% of the entire worldís stock market capitalization.

Diversify your investments in other countries whose stock markets are on the verge of exceptional growth.

need $1 Million to retire on comfortably in the next century. Einstein said that compounded return on principal is one of the seven wonders of the world.

6.  Invest With Your Head, Not Your Heart


By investing in a Mutual Fund or a Segregated Fund, you obtain a Financial Manager behind the scene.  The fund managerís job is to look into the future and steer your investment toward good performance.  This is done via the timely purchasing and selling of securities held within the fund.  When invested in recommended Mutual Funds or Segregated Funds, your chances of long term gain are much better.  Unadvised, optimistic purchasing and spontaneous pessimistic selling usually occur at precisely the wrong time in the market cycle - costly mistakes to avoid.


7.  Review Your Investment Strategies & Goals


RRSP investments need attention to achieve maximum performance.  Consider that in the first ten years of retirement your lifestyle doesnít change a lot. Sure, your not working, but you have all of this extra time, time for shopping, golfing, tennis, dining out, and those dream-trips which may cost $3,000 to $10,000 each. Study all the issues revolving around retirement and the impact they will have on your future net worth.  It takes continual effort, focus, and determination. A balance of your priorities and goals. Retirement Planning is also not done in a vacuum. Consider the cost of educating your children, the future care of parents, and health care - in view of the expense of prescription drugs and nursing homes. And donít forget the effect of inflation on buying power, should you live to age 90.

Pro-active review of your investment performance, strategically aligned with your goals, ensures that  youíre on the  right track.



Looking for Tax Relief?




The beauty of RRSPís is that your contribution is entirely deducted from your income. This has the effect of a tax write-off, reducing your taxable income and in many cases, placing you in a lower tax bracket. In addition, ongoing returns on investments - capital gains, interest, and dividends all accrue tax deferred. Tax is payable only at the future date of withdrawal upon retirement.


RRSPís are Canadiansí most POWERFUL tax strategy


Your Race Against Time Is On!



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